New bill containing various urgent tax measures adopted by Belgian Parliament

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EY Belgium Tax
15 Jul 2020
Subject Tax alert
Categories Covid-19
Jurisdictions Belgium

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On 9 July the Federal Parliament adopted a new bill containing various tax measures. This is the third Federal tax law aimed at mitigating the far reaching impact of COVID-19 for businesses. Previous laws aimed to fiscally support business were adopted in May and June. (see previous tax alerts in this regard: link & link). Earlier this week the fiscal relaunch stimulus, known as the ‘reconstitution reserve’ that was not approved as part of the second batch of measures and reintroduced via separate law proposition, was also adopted by the Finance Commission on 7 July. This initiative would be put to the vote in plenary session next week.

Bill containing various urgent tax measures

The new bill mainly contains measures both aimed at increasing investments in and reducing costs for businesses.

  • Investments

    Investment deduction

    At the occasion of the corporate tax reform at the end of 2017 the basic percentage of the investment deduction was increased up to 20% for fixed assets obtained or established between 1 January 2018 and 31 December 2019. This bill introduces a further temporary increase of the latter percentage up to 25% and this for fixed assets obtained or established between 12 March and 31 December 2020. At the same token a 2-year carry forward (instead of 1 year) would apply for the amount of unused investment deduction with regard to fixed assets obtained or established in 2019.

    Tax shelter investments

    The existing tax shelter for investments in start-ups and scale-ups (i.e. a tax reduction for individuals) will be broadened and would become applicable for direct capital investments in SME's (according to the new code of companies) affected by the COVID-19 outbreak. It regards a temporary measure for capital increases up to 31 December 2020. The measure does not necessarily apply to investments in a starter or scale-up, but to all SME’s that have suffered a decrease in turnover of at least 30% during the period of 14 March up to 30 April compared to the same period of the previous year. In case of start-ups, comparison is to be made with the projected turnover according to the financial plan and the effective turnover during the latter period. From the regime are excluded, companies holding direct participations in companies residing in tax havens as well as companies making certain payments to such tax havens. Various types of companies are excluded from this measure, such as investment & financing companies, real estate companies, management companies, listed companies,…

    The total amount of invested capital via this measure may not exceed € 250k and the tax reduction may not be cumulated with certain existing tax reductions or regional tax reductions and tax credits.

  • Cost reduction

    Temporary Payroll tax exemption

    In order to mitigate the payroll expenses during the months of June, July and August, a new temporary payroll tax exemption is introduced. It applies only to companies that have made use of the temporary unemployment regime during an uninterrupted period of at least 30 days.

    The Payroll tax exemption will be calculated based on the total cost of payroll tax of a reference period, i.e. the month of May. The exemption is equal to 50% of the difference between, on the one hand, the total amount of payroll tax for each of the months June, July and August and the total amount of payroll tax relating to the reference period on the other hand.

    The measure would not apply to companies making a capital reduction, distributing a dividend or performing a share buy-back between 12 March 2020 and 31 December 2020 and equally not to companies who - during the same period - have made payments of at least 100k EUR to tax havens (unless these payments can be justified by valid business reasons) or directly hold a share participation in a company located in a tax haven. More details on this measure: see EY PAS alert.

    Tax deduction catering costs

    Catering costs relating to events will be made deductible for 100% instead of only 50%. This measure applies for costs made or borne during a period from 8 June up to 31 December 2020.

  • Other measures

    Covid-19 Loss carry-back

    The law also leads to changes to the recently adopted Covid-19 loss carry-back. This measure allows companies to impute expected losses of the current taxable period on the taxable profits of the previous taxable period by way of a tax exempt reserve. The law now limits the use of the exempted reserve to an accounting year closed between 13 March 2019 and 31 July 2020, instead of 13 March 2019 and 31 December 2020. This aligns the measure with a similar measure applicable in personal income taxation.

    Tax reduction for donations

    The percentage of tax reductions for gifts to recognized institutions will be increased from 45% up to 60%. The existing income tax COVID-19 measures relating to donations of computers to schools are extended up to 31 December 2020 (instead of 1 September 2020).

    VAT - December advance payment

    Taxpayers will exceptionally be exempt from the advance payment of VAT during the month of December. This applies both for the advance payments relating to quarterly and monthly VAT returns with regard to the covered period at year-end.

    VAT on giving of samples or the making of gifts of small value for business purposes

    The current VAT COVID-19 measure exempting the donation of computers to schools from VAT will be extended up to 31 December 2020.

    Consumption vouchers

    The law introduces a new tax incentive for employers attributing so-called consumption vouchers to their personnel. This benefit in kind will not be taxable at the level of the beneficiary and costs relating to it will be deductible at the level of the employer.

    Expenses relating to child care

    The existing COVID-19 measure relating to the tax reduction for expenses relating to child care is also extended up to 31 December 2020.

Proposition of law introducing a reconstitution reserve for companies

As part of a separate proposition of law, the so-called ‘recovery reserve’ for companies to help reconstitute their solvability that has suffered due to the COVID-19 outbreak, was adopted by the Finance Commission on July 7th.

In practice this reserve would allow companies, during 3 consecutive taxable periods relating to tax years 2022, 2023 and 2024, to exempt profits corresponding to the amount of losses they have incurred in 2020, under the conditions of maintaining their equity position as well as at least 85% of their existing employment spend. The reserve is subject to the intangibility condition, meaning that the reserve may become taxable ultimately at the occasion of a liquidation of the company, or use of the reserve (such as distribution).

The measure would not apply to:

  • Companies performing a capital decrease, a share buy-back or paying dividends in the period from 12 March 2020 until the day of filing the tax return relating to a tax year in which a reserve is built up;
  • Companies making payments to companies located in tax havens (unless supported from an economic perspective and unless they do not exceed 100k€) or having share participations in companies situated in tax havens;
  • Companies that benefit from a special tax regime such as cooperative participation companies, companies subject to the special tax regime for shipping companies, real estate investment companies, …

As regards the COVID-19 carry-back of losses and the reconstitution reserve, EY has scheduled a Dutch and a French webinar on this topic. Click here to register for one of the sessions.